the recommendations that we made. They have also tried to correct some of the record-keeping problems by increased training for some of the staff, and as we mentioned, some of the oversight is being improved.

I think we mentioned that earlier on, although both headquarters and the field operations had gone to the lab and had done inspections and neither of them found the 10,000 missing documents that we reported. Part of that problem was that they didn't do a good statistical sample. They have now agreed to change their oversight and sampling processes that would catch this kind of thing in the future.

Mr. NAGLE. The missing documents at the laboratory, according to the GAO report, cover a wide range of subject matter, including nuclear weapons design, x-ray laser design, special nuclear materials, such as plutonium, and photographs of nuclear weapons and nuclear weapons tests-and we don't know where those documents are?

Mr. REZENDES. Right. We share that concern.

Mr. NAGLE. Mr. Layton, do you share my concern about this? I mean, we don't know where they are.

Mr. LAYTON. Mr. Conley just advised me that we are doing a similar kind of review of documents at a different DOE facility. Apparently, there was no requirement to catalog documents at the secret level until recently, so when they attempted to catalog them and find them, they had this difficulty in corralling all of the docu

ments.

Mr. NAGLE. I might tip you off that. If at one of these sites, you get a large number of applicants for janitorial positions with an Iraqi heritage, you might want to kind of screen those a little closer than what we currently do.

If it happens at the sites that we know about, is it safe to assume that this type of situation is taking place at other sites? I mean we are spending $12.5 billion to $16.2 billion in M&O contractors. Do we have any assurances that, in fact, this is not standard operating procedure at all M&O sites?

Mr. REZENDES. You're exactly right.

Doris Cannon worked on that and she can give you some information.

Ms. CANNON. I am not sure of the General Frieze report that covered safeguards and securities at Admiral Watkins' task force, looking at safeguards and security throughout the complex. One of the issues that was covered in that report was classification and accountability of documents.

While they did not get into a lot of the specifics, this was an area of concern that was raised at other facilities. DOD had required 100 percent inventory of all secret, classified documents at all facilities, including headquarters.

One of the concerns that we raise in our report is that it has taken about two years to get this 100 percent inventory completed. It is my understanding that, to date, it is still not completed. But they were showing some of the same findings that we had in terms of missing documents.

What I want to add to a previous comment is: DOE and the laboratory will maintain that these documents have not been stolen;

that it is a matter of record-keeping or an accountability problem, but the concern that we had is that there is no assurance that that is, in fact, the case. That is the concern that we have expressed in

this report.

Mr. NAGLE. So I could safely assume that these other operations are like the operations we've talked about that you have examined; that there could be literally hundreds of thousands of documents, including nuclear weapons designs, x-ray laser designs, and special nuclear materials and photographs of nuclear weapons and nuclear tests and Lord knows the list of other sensitive areas that potentially are missing or could be missing. We have not even done an assessment to find out how many documents are missing at the other sites where we have an M&O operation. Is that a fair statement?

Mr. REZENDES. We have no assurance that that is not happening in the other places to the same extent.

Mr. NAGLE. Mr. Layton?

Mr. LAYTON. I have only looked at one facility, sir, and that is not a completed job yet. I am listening to GAO and learning.

Mr. NAGLE. I'm learning, too, except that I'm listening to GAO on a report dated February 8, 1991. This is August.

Mr. LAYTON. Yes, sir.

Mr. NAGLE. It's the Department of Energy's policy not to review the exposure of loss or risk of loss of $12.5 billion worth of M&O contracts unless we get a GAO report first? I would have thought you would have ordered a massive internal agency review-or am I being over-dramatic and are these documents not as sensitive as what this report seems to indicate they are?

Mr. LAYTON. I don't speak for the management of the Department of Energy, sir. From our perspective, we are looking at a DOE facility.

Mr. NAGLE. One more?

Mr. LAYTON. Yes, sir.

Mr. NAGLE. How many are there in total?

Mr. LAYTON. That depends on how you count them, but there are at least eight field offices.

Mr. NAGLE. This wasn't a field office. This was a site. How many sites are there?

Mr. LAYTON. There are 40 to 50.

Mr. NAGLE. The question I was asked to ask you is: are there lessons learned at the laboratory that should be applied on a DOEwide basis? Apparently, the answer to the question is: no; we'll do them one site at a time even though we found tremendous exposure here, the loss of classified documents, the most sensitive material this nation possesses, which you yourself say could threaten the very security of the United States.

Mr. LAYTON. I think we have observed that contract administration is key to the success of the Department of Energy, and we found what we believe to be weaknesses, sir.

Mr. WOLPE. If the gentleman would yield for a moment, it ought to just be clarified that the Inspector General is not within the management line of responsibility within DOE, and it is the report of the Inspector General that essentially serves to provide independent analysis, and that of the GAO, that has highlighted the

material that we now have in front of us so that we know there is a problem and DOE now knows there is a problem. I just want to clarify that he is not speaking for the Department in any respect. Mr. NAGLE. I understand and appreciate that clarification. I didn't mean the record to imply otherwise.

Where do we go from here? Where should we go from here? Should there not be a review of all sites? Should there not be an independent agency review of all sites? Should there not be an independent assessment as to the sensitivity of the material lost? Should not one get moving to solve this problem?

Mr. REZENDES. We agree. We think there is an applicability to what we found throughout the rest of the Department of Energy, and we think that they should look around to make sure they have a statistical sampling in place, that they have centralized management control over classified documents, and basically every one of the recommendations that we found at Lawrence Livermore, we think, have applicability throughout DOE.

Mr. NAGLE. To bring this full circle, since these are M&Os, is there any security clearance on the persons that are hired by the management company? Is there a mechanism now in place, so that if I am an Iraqi janitor, I can't show up and get a job out there? Are there those security checks?

Mr. REZENDES. DOE clears people for the laboratories as well as all the other M&O contractors or many of those contractors, I should say. In fact many of the contractors do get DOE clearances, however, not everyone does. Not everyone needs a clearance.

You can get a building access pass into a DOE facility to do your piece of work without being cleared for the Q security clearance for whatever reason you needed access to the complex. In addition, those that do get clearances-and GAO has reported on this in the past-clearance is a long, painful, costly process. The backlogs are anywhere from one to two years until you get an individual cleared with the Q clearance.

Mr. NAGLE. Thank you very much.

I thank the chairman for his indulgence on time.

Mr. WOLPE. Thank you very much, Mr. Nagle.

I would like to pursue two additional areas. One deals with this whole question of pensions, health benefits, and the like.

DOE pays the pension and retirement benefits of all employees who work at the labs; is that correct?

Mr. LAYTON. That's correct.

Mr. WOLPE. At the time you completed your study, Mr. Layton, what was the Government's liability for the health benefits for currently retired workers from the labs?

Mr. LAYTON. It was $345 million, sir.

Mr. WOLPE. Your report indicated that DOE did not know how costs were being divided between the University of California and the Government for workers who may have split their careers between the University of California and the labs; is that correct? Mr. LAYTON. That's correct.

Mr. WOLPE. The SAN, as I understand it, thought the costs were being split to reflect the amount of time at the respective institutions.

Mr. LAYTON. Yes, they did.

Mr. WOLPE. Were they in fact splitting the costs in that way? Mr. LAYTON. I believe that they are looking into this now, but my recollection at the time was not split.

Mr. WOLPE. So, we still don't know as of this moment whether or not those costs are in fact split; is that correct?

Mr. LAYTON. At the time of our report, they didn't know. Now they are aware that they're not being split.

Mr. WOLPE. They are not being split?

Mr. LAYTON. Not being split.

Mr. WOLPE. The labs have been in operation for some 50 to 60 years, and DOE is just now getting around to learning how the University of California is charging it for retirement health benefits; is this the summation of what you have discovered?

Mr. LAYTON. That is a way of characterizing it. I think that it's a demonstration of the lack of contract administration that is taking place the inability to get data on a timely basis, to review it, to have people to do the job-I think it's a contract administration deficiency, sir.

Mr. WOLPE. Mr. Rezendes, can you add to that?

Mr. REZENDES. Sure. Basically, it was not until February 4, 1991 that the SAN operations director basically wrote the University of California and stated their understanding of what the agreement was. That was basically that there was a pro rata split of these costs.

The University wrote back on February 12, 1991 and clarified it and said that there was no proration of these costs and that, basically, when the employee retires, the facility that he retires from bears the full cost of that retirement. So that's as early as just a few months ago.

Mr. WOLPE. That is remarkable commentary, the non-management of a critical area. Let's switch to a related topic, that of pensions.

Mr. Layton, what did you find regarding the pension fund?

Mr. LAYTON. The SAN had a consultant's report that said the pension fund may be over-funded.

Mr. WOLPE. If that is the case, then DOE can be saving some money by reducing its annual contribution; is that correct? Mr. LAYTON. If they're over-funded, that's correct, sir.

Mr. WOLPE. Why doesn't the Department of Energy know whether or not it is over-funded for sure?

Mr. LAYTON. I believe the answer is similar to the previous one. It is a contract administration issue.

Mr. WOLPE. And they don't have the information they need in order to make that assessment?

Mr. LAYTON. That is my understanding.

Mr. REZENDES. According to information we have from DOE, they claim they are just not getting good information from the University of California.

Mr. WOLPE. When will the Department of Energy know?

Mr. REZENDES. They tell us that they're working on it now.

Mr. WOLPE. How many more years will that require to get the University of California to pick up the phone, call in, and describe how they compute their pension formulas and the rest of that. Mr. REZENDES. Perhaps another 40.

Mr. WOLPE. Between pensions and retirement health, we are talking here about hundreds of millions of dollars. Yet, it took your report for the Department of Energy to realize its lack of knowledge in these matters. You describe poor contract administration as the explanation. I think that is rather gentle language.

Let me turn to the question of the management allowance. Mr. Layton, I would like to talk about this management allowance that the University of California receives for running these labs. What is the Department of Energy's policy for providing management allowances to nonprofit, educational institutions like the University of California that run facilities such as Lawrence Livermore and Lawrence Berkeley Labs?

Mr. LAYTON. It is the DOE policy not to pay fees to not-for-profit institutions, but if justified, they will pay a management allow

ance.

Mr. WOLPE. Under these contracts, the University of California receives a management allowance, correct?

Mr. LAYTON. That's correct.

Mr. WOLPE. How much does the University of California now receive?

Mr. LAYTON. When we did our review, it was $8 million, and the contract that had just been negotiated was for $12 million with annual increases of $250,000 a year.

Mr. WOLPE. So how much did the University of California receive under the old contract?

Mr. LAYTON. They received $8 million, sir.

Mr. WOLPE. What was the reason for giving the University of California a 50 percent increase in this management allowance?

Mr. LAYTON. The reason for the increase was based on undisclosed expenses. I think there were five categories listed in the contract that were supposed to be beneficial and complementary activities to the laboratory.

Mr. WOLPE. Was there a thorough justification for the increase? Mr. LAYTON. We don't believe that there was a thorough justification.

Mr. WOLPE. What was the Department of Energy's position on this point?

Mr. LAYTON. The headquarters didn't think that there was adequate justification for the increase. SAN recommended the increase based on reviews that it had performed.

Mr. WOLPE. SAN did not look to see if the fees in the amounts as paid to those other contractors were an appropriate basis for comparison?

Mr. LAYTON. I don't believe they did.

Mr. WOLPE. Responding to your report, the Department director of procurement resisted establishing standards in the DEAR for determining whether a management allowance should be paid to a nonprofit, but he did say that the criteria which should be used are the amounts of costs that would be considered allowable and other specific, identifiable expenses required of contract work.

How does a $4 million increase based on complementary beneficial activities-I think that's the term of art-comply with these criteria?